1 00:00:00,080 --> 00:00:03,120 Speaker 1: Let's get to our guest. Mittle could techa he is 2 00:00:03,240 --> 00:00:06,240 Speaker 1: ahead of E M Strategy a T D Securities who 3 00:00:06,320 --> 00:00:10,479 Speaker 1: joins from Singapore. Mittle, thanks for being with us. A 4 00:00:10,480 --> 00:00:14,120 Speaker 1: lot of focus now on these rising COVID infections in China. 5 00:00:14,280 --> 00:00:18,440 Speaker 1: To what extent could we see growth really curtailed. I mean, 6 00:00:18,520 --> 00:00:21,000 Speaker 1: it's und not likely that we're going to have the 7 00:00:21,040 --> 00:00:23,040 Speaker 1: growth target met, but I mean we're going to see 8 00:00:23,160 --> 00:00:28,040 Speaker 1: much weaker growth on the mainland. It's a very good question, 9 00:00:28,080 --> 00:00:31,600 Speaker 1: and I think we've been pushing back for some time 10 00:00:31,760 --> 00:00:36,520 Speaker 1: about the optimism or against the optimism reopening the fact 11 00:00:36,560 --> 00:00:40,320 Speaker 1: that COVID cases have been rising for the last few weeks. 12 00:00:40,360 --> 00:00:45,000 Speaker 1: But on top of that, um the vaccine worries in 13 00:00:45,000 --> 00:00:48,920 Speaker 1: the sense that the elderly population in China still not 14 00:00:49,400 --> 00:00:51,960 Speaker 1: having the booster shots, and then at the same time 15 00:00:52,000 --> 00:00:54,240 Speaker 1: some of the concerns about the efficacy of the Chinese 16 00:00:54,320 --> 00:00:56,920 Speaker 1: vaccines has meant that in any case you'd see a 17 00:00:56,920 --> 00:00:59,360 Speaker 1: slow opening. And now now the fact that you're seeing 18 00:00:59,680 --> 00:01:03,240 Speaker 1: a amp up in COVID cases and in turn more 19 00:01:03,280 --> 00:01:07,440 Speaker 1: restrictions across China is just adding to that downside risk 20 00:01:07,480 --> 00:01:09,639 Speaker 1: as you mentioned to growth. Now, our forecast has been 21 00:01:09,640 --> 00:01:13,080 Speaker 1: frette downbeat anyway, three point one percent GDP growth this year. 22 00:01:13,360 --> 00:01:15,720 Speaker 1: We do expect some sort of a mechanical improvement in 23 00:01:15,760 --> 00:01:18,600 Speaker 1: growth next year, largely due to base effects, to get 24 00:01:18,680 --> 00:01:21,240 Speaker 1: us up to about four point seven percent, but as 25 00:01:21,240 --> 00:01:24,679 Speaker 1: you know, this is probably still well below the levels 26 00:01:24,680 --> 00:01:26,760 Speaker 1: of broth we've seen in China in recent years, so 27 00:01:27,000 --> 00:01:30,880 Speaker 1: we're not particularly optimistic here. And it's not just COVID cases. 28 00:01:31,280 --> 00:01:33,800 Speaker 1: Although there have been some new measures on the property sector, 29 00:01:34,480 --> 00:01:36,600 Speaker 1: it's still a long way to go before we see 30 00:01:36,640 --> 00:01:39,840 Speaker 1: recovery there. Exports are slowing down as well. That was 31 00:01:39,880 --> 00:01:42,400 Speaker 1: a big boost to growth during COVID, so there's not 32 00:01:42,480 --> 00:01:45,280 Speaker 1: a lot to be optimistic about their parts. Infrastructure is 33 00:01:45,280 --> 00:01:48,080 Speaker 1: the only real big source of support for China's economy 34 00:01:48,120 --> 00:01:52,640 Speaker 1: at present. You tempted to use that words and investable, 35 00:01:54,320 --> 00:01:56,360 Speaker 1: I wouldn't say that. Look, I think there's always a price, 36 00:01:56,440 --> 00:01:59,440 Speaker 1: and I think China's asset markets have come under a 37 00:01:59,440 --> 00:02:02,920 Speaker 1: lot of pressure in recent weeks and months. They've underperformed 38 00:02:03,400 --> 00:02:07,040 Speaker 1: regional markets, which have already been weak anyway, and so 39 00:02:07,200 --> 00:02:11,760 Speaker 1: there has been a shifting sentiment towards China equities, particularly 40 00:02:11,760 --> 00:02:14,120 Speaker 1: in the tech sector. I wouldn't quite say an investable, 41 00:02:14,240 --> 00:02:17,000 Speaker 1: but I still would be quite cautious of jumping back in. 42 00:02:17,520 --> 00:02:19,280 Speaker 1: We still need to get some clarity as well in 43 00:02:19,400 --> 00:02:22,280 Speaker 1: terms of where and what happens in terms of the 44 00:02:22,600 --> 00:02:25,680 Speaker 1: tech sanctions that the US has put into place, as 45 00:02:25,720 --> 00:02:29,040 Speaker 1: well as other tariffs and talks between President President she 46 00:02:29,120 --> 00:02:31,600 Speaker 1: and Biden whether that leads anywhere. But I do sense 47 00:02:31,639 --> 00:02:35,600 Speaker 1: a shift in sentiment from investors towards Chinese assets, despite 48 00:02:35,639 --> 00:02:38,080 Speaker 1: the worries about growth that are ongoing and metal. I 49 00:02:38,120 --> 00:02:43,320 Speaker 1: mentioned there the remarks from China's State Council about the 50 00:02:43,440 --> 00:02:47,080 Speaker 1: timely and appropriate use of policy tools. That does signal 51 00:02:47,120 --> 00:02:49,720 Speaker 1: a triple our cat is in the works. When do 52 00:02:49,720 --> 00:02:51,760 Speaker 1: you expect to see that? And do you expect anything 53 00:02:51,760 --> 00:02:53,880 Speaker 1: else to come down the line in terms of support. 54 00:02:55,880 --> 00:02:58,560 Speaker 1: It could happen fairly soon. I think when you've had 55 00:02:58,639 --> 00:03:01,840 Speaker 1: this sort of explicits eatments, it's more than likely it 56 00:03:01,840 --> 00:03:03,880 Speaker 1: comes in a matter of days rather than even weeks. 57 00:03:04,440 --> 00:03:06,200 Speaker 1: But the question I guess is will it be enough? 58 00:03:06,240 --> 00:03:09,800 Speaker 1: I mean, it's China shifting towards a more targeted approach 59 00:03:09,880 --> 00:03:13,040 Speaker 1: to easing. We didn't, for example, see any loan prime 60 00:03:13,160 --> 00:03:16,320 Speaker 1: rate cuts, which is another policy rate um and I 61 00:03:16,320 --> 00:03:18,560 Speaker 1: think this is partly again to avoid any build up 62 00:03:18,560 --> 00:03:22,000 Speaker 1: in lebration. So if we do see even a fifty 63 00:03:22,000 --> 00:03:25,120 Speaker 1: basis points maximum cut in the triple R, I don't 64 00:03:25,160 --> 00:03:28,200 Speaker 1: think it really am ads much to the growth picture. 65 00:03:28,840 --> 00:03:30,560 Speaker 1: It's not going to be enough to move the needle 66 00:03:30,600 --> 00:03:33,160 Speaker 1: in our view. Uh And, Look, there may be more measures, 67 00:03:33,200 --> 00:03:36,000 Speaker 1: and we have been seeing an array of announcements in 68 00:03:36,040 --> 00:03:39,640 Speaker 1: recent weeks, in particular aim towards the property sector and 69 00:03:39,960 --> 00:03:42,600 Speaker 1: to try and mitigate some of the COVID impact on 70 00:03:42,640 --> 00:03:45,240 Speaker 1: the economy as well. But again this is much of 71 00:03:45,280 --> 00:03:47,400 Speaker 1: the same as what we've been hearing for a long 72 00:03:47,440 --> 00:03:50,400 Speaker 1: time now. It's just more measures on a similar vein. 73 00:03:50,640 --> 00:03:53,400 Speaker 1: But we're not really seeing is huge amounts of money 74 00:03:53,440 --> 00:03:56,480 Speaker 1: being put into the property market or in terms of 75 00:03:56,480 --> 00:03:59,400 Speaker 1: other measures to boost the economy. So I think again 76 00:03:59,520 --> 00:04:02,280 Speaker 1: it doesn't in our view, is unlikely to move the 77 00:04:02,320 --> 00:04:04,280 Speaker 1: needle in terms of growth. We still stick to a 78 00:04:04,320 --> 00:04:08,040 Speaker 1: relatively downbeat assessment going forward. So does that necessarily mean 79 00:04:08,120 --> 00:04:11,640 Speaker 1: that the foreign capital will begin to flow away from China? 80 00:04:11,720 --> 00:04:14,080 Speaker 1: Given everything that you're saying, it seems like there's not 81 00:04:14,160 --> 00:04:16,640 Speaker 1: a compelling case to put money to work on the mainland. 82 00:04:17,920 --> 00:04:20,160 Speaker 1: I think capital in any case, if you look this 83 00:04:20,240 --> 00:04:22,880 Speaker 1: year has been fairly weak in terms of the investment 84 00:04:22,920 --> 00:04:25,920 Speaker 1: into China. There has been perhaps more optimism on the 85 00:04:25,960 --> 00:04:29,919 Speaker 1: equity market, although equity returns have been fairly soft, but 86 00:04:30,040 --> 00:04:32,839 Speaker 1: the bond market has seen now around nine months of 87 00:04:33,000 --> 00:04:37,839 Speaker 1: outflows continually. At the same time, foreign dict investment flows 88 00:04:37,839 --> 00:04:41,040 Speaker 1: have also been quite soft in relative terms. So again, 89 00:04:41,080 --> 00:04:43,920 Speaker 1: you know, I think investors already sort of looking at 90 00:04:43,960 --> 00:04:47,080 Speaker 1: this growth picture and I guess some of the other 91 00:04:47,120 --> 00:04:50,720 Speaker 1: concerns they have and have slowed their investment trajectory towards China. 92 00:04:50,760 --> 00:04:53,440 Speaker 1: Now the question is does it continue next year, where 93 00:04:53,520 --> 00:04:56,440 Speaker 1: you know, we well probably see better conditions globally. If 94 00:04:56,480 --> 00:04:58,920 Speaker 1: we do see some poring in the relationship with the US, 95 00:04:59,040 --> 00:05:01,600 Speaker 1: that will also help perhaps a bit more stimulus. I 96 00:05:01,640 --> 00:05:05,360 Speaker 1: think the outlook is better next year, But nonetheless, we've 97 00:05:05,400 --> 00:05:09,520 Speaker 1: already seen a fairly significant retreat of capital in this year. 98 00:05:10,440 --> 00:05:12,239 Speaker 1: We're seeing a bit of U as S dollar weakness 99 00:05:12,480 --> 00:05:15,960 Speaker 1: at the moment, and typically this would make for a 100 00:05:16,000 --> 00:05:19,160 Speaker 1: ball case for emerging markets trying to Notwithstanding, are there 101 00:05:19,200 --> 00:05:23,880 Speaker 1: any parts of emerging Asia that are looking appealing right now? Yes, 102 00:05:23,960 --> 00:05:25,680 Speaker 1: and I think a weaker dollar is going to help 103 00:05:25,720 --> 00:05:28,240 Speaker 1: everyone really in Asian in terms of you look at 104 00:05:28,240 --> 00:05:30,760 Speaker 1: the currency markets, you look at local currency bonds have 105 00:05:30,839 --> 00:05:34,159 Speaker 1: been suffering from a strong dollar um and also central 106 00:05:34,200 --> 00:05:36,599 Speaker 1: banks that are about to intervene dramatically in recent months. 107 00:05:36,560 --> 00:05:38,880 Speaker 1: So I think it will be broadly beneficial. But in 108 00:05:38,960 --> 00:05:41,680 Speaker 1: terms of the growth picture, we do think countries that 109 00:05:41,720 --> 00:05:45,480 Speaker 1: are more domestically focused, such as India, Indonesia, and perhaps 110 00:05:45,480 --> 00:05:49,080 Speaker 1: even tourist driven countries to just Thailand, will benefit more 111 00:05:49,200 --> 00:05:51,719 Speaker 1: in the coming months from a growth pickup than the 112 00:05:51,800 --> 00:05:55,479 Speaker 1: trade driven economies such as Career in Taiwan, for example, 113 00:05:55,480 --> 00:05:58,839 Speaker 1: which I've already seen some very sharp weakening in their exports, 114 00:05:59,080 --> 00:06:01,800 Speaker 1: in part due to China weakness, but also due to 115 00:06:01,880 --> 00:06:05,239 Speaker 1: impending recessions that are likely in Europe and the US 116 00:06:05,279 --> 00:06:07,400 Speaker 1: in the months ahead. I want to get your take 117 00:06:07,440 --> 00:06:09,960 Speaker 1: on a story that is moving on the Bloomberg terminal 118 00:06:10,040 --> 00:06:14,120 Speaker 1: a very quickly in middle Bill Ackman, the founder of 119 00:06:14,400 --> 00:06:17,800 Speaker 1: Pershing Square Capital, saying today that he is betting against 120 00:06:17,880 --> 00:06:20,320 Speaker 1: the Hong Kong dollar on the notion that the peg 121 00:06:20,400 --> 00:06:23,200 Speaker 1: with the green bag is going to break? Is he 122 00:06:23,240 --> 00:06:27,320 Speaker 1: wrong in this trade? Ok? I think Eventually they'll have 123 00:06:27,400 --> 00:06:29,120 Speaker 1: to be a shift in the PEG. I just don't 124 00:06:29,200 --> 00:06:31,599 Speaker 1: think it's going to happen anytime soon, and it'll be 125 00:06:31,720 --> 00:06:34,240 Speaker 1: very graduate, you know, if it does bring I mean, 126 00:06:34,279 --> 00:06:36,000 Speaker 1: there is an argument to say that we see a 127 00:06:36,040 --> 00:06:38,360 Speaker 1: PEG with the R and B, but again you're two 128 00:06:38,360 --> 00:06:41,680 Speaker 1: different financial systems, one country with a capital account. It's 129 00:06:41,680 --> 00:06:43,760 Speaker 1: not convertible, and I still think it's a very long 130 00:06:43,800 --> 00:06:48,400 Speaker 1: way off, all right, Middle ahead of Emerging Market Strategy 131 00:06:48,520 --> 00:06:51,040 Speaker 1: at t D Securities. Thanks so much for joining us 132 00:06:51,040 --> 00:06:51,760 Speaker 1: with your views.